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U.S. jobs report ahead, Caixin survey surprise - what's moving markets

September 1, 2023 6:10 AM EDT

Investing.com -- The Labor Department's closely-watched monthly jobs report is set to headline the economic calendar on Friday, with the data likely to factor into the Federal Reserve's future interest rate decisions. Meanwhile, a private survey shows that China's factory activity surprisingly expanded in August, as Beijing rolls out fresh measures to help reinvigorate the country's stuttering economy.


1. Futures inch up ahead of key jobs report


U.S. stock futures rose on Friday as investors digested a losing August on Wall Street and awaited the release of crucial nonfarm payrolls.


By 05:30 ET (09:30 GMT), the Dow futures contract was up by 115 points or 0.3%, S&P 500 futures added 13 points or 0.3%, and Nasdaq 100 futures inched up by 25 points 0.2%.


All of the main indices on Wall Street posted losses in August, with the broad-based S&P 500 and tech-heavy Nasdaq Composite slumping in particular to their first monthly decrease since February. On Thursday, the 30-stock Dow Jones Industrial Average dipped by 0.5% and the S&P 500 lost 0.2%, while the Nasdaq added 0.1%.


The moves came after economic data showed that the personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, edged up as anticipated on an annual basis in July. Month-on-month, the PCE number held steady, pointing to a potential easing in price pressures. Meanwhile, the rate of household spending ticked higher, suggesting continued resilience in the wider economy despite a recent surge in interest rates.


Following the numbers, traders mostly stuck to their bets that the Fed will likely keep borrowing costs unchanged at its upcoming policy meeting later this month. According to Investing.com's Fed Rate Monitor Tool, there is now an 88% chance that the U.S. central bank will maintain the target range for the federal funds rate at 5.25% to 5.50%, down slightly from a 90% probability on Thursday.


2. Nonfarm payrolls loom


The next major event on the U.S. economic calendar is scheduled to come later in the session on Friday with the publication of the August jobs report.


Economists project that nonfarm payrolls increased by 170,000 during the month after adding 187,000 in July, while average hourly earnings growth is seen moderating slightly month-on-month to 0.3%. The unemployment rate in the world's largest economy is also anticipated to remain unchanged at 3.5%.


Separate data this week has painted a picture of a slowing, albeit tight, U.S. job market. The Fed will likely be on the lookout for more indications that this cooling is continuing, although not to the point where it threatens economic activity.


Curtailing labor demand and mitigating wage growth has been a major pillar of the Fed's long-standing campaign of rate hikes, with policymakers hoping that these trends may help lower inflation closer to their 2% objective. Despite estimates that the central bank may soon begin to back away from the cycle, it is still uncertain what the Fed will do after its gathering this month.

The jobs report could provide some clarity to this question.


3. Chinese manufacturing activity unexpectedly grows in August - Caixin PMI


Chinese factory activity unexpectedly grew in August, a private survey showed on Friday, as manufacturers were boosted by an uptick in new orders.


The Caixin manufacturing purchasing managers’ index (PMI) read 51.0 for August, much higher than estimates for a reading of 49.3 and above last month’s reading of 49.2. A level above 50 indicates expansion, with the Caixin PMI reaching its highest mark since February. Improving local demand, aided by some monetary stimulus from the Chinese government, helped counter weakness in export-oriented businesses.


However, the Caixin data stood in contrast to the official PMI, which came in 49.7 on Thursday, suggesting contraction.


Beijing has faced growing calls to roll out stronger measures to reignite the country's sputtering post-pandemic recovery. On Friday, authorities introduced new steps to support the local currency and prop up China's ailing real estate sector.


4. Lululemon (NASDAQ: LULU) climbs on positive third-quarter commentary


Shares in Lululemon rose in premarket U.S. trading on Friday after the workout gear maker said its third-quarter was off to a "solid start" thanks to strong demand in North America.


The stock was initially choppy after the yogawear company posted its second-quarter results. Sales in North America jumped by 11%, although the uptick was offset by slowing quarter-on-quarter revenue growth in China.


Despite a recent pullback in customer spending on nonessential items that has hit many retailers, the Vancouver-based group has said that it has not been seeing a change in consumer behavior. Chief Executive Calvin McDonald noted in a call with analysts following the earnings that shoppers are "responding well" to back-to-school and early fall product lines as well.


Lululemon subsequently improved its full-year revenue and profit guidance, contrasting a more cautious outlook for the second half taken by other sports apparel manufacturers.


5. Oil on pace to break two-week losing streak


Oil prices were on course to register weekly gains on Friday amid optimism that the group of major crude producers will extend output cuts to the end of the year.


Russian Deputy Prime Minister Alexander Novak said on Thursday that Moscow had reached a new deal with its peers in the Organization of Petroleum Exporting Countries and its allies, a group known as OPEC+, to further slash supplies, and will outline more reductions in production next week.


These reductions would likely add to ongoing supply cuts by Russia and Saudi Arabia, signalling a possibly tighter supply outlook for the rest of the year.


By 05:31 ET, the U.S. crude futures traded 0.8% higher at $84.30 a barrel, while the Brent contract climbed 0.7% to $87.47. Both contracts were up more than 3% this week, breaking two-week losing streaks.


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